Indonesia: Bali craft brewers boosting Indonesia’s beer market

Putu Wiranatha watched with growing unease as the coronavirus pandemic threatened to upend his plans to launch a beer company in 2020, the Nikkei Asia reported on February 17.

In March of that year, authorities in Bali asked people to stay at home, restaurant dining hours were reduced, and the lights went out on the island's vibrant nightlife. Within months, tourist arrivals would plummet to near zero.

"That was the moment when we realized this is a problem," he told Nikkei Asia.

The 26-year-old faced a tough choice: delay the launch - wasting months of planning and momentum - or carry on. He chose to proceed.

Nearly two years later, his brewery Kura Kura is the toast of the island and among a handful of small companies on the cusp of disrupting Indonesia's beer market.

Along with Bali-based breweries Islands Of Imagination and Island Brewing, Kura Kura is on the front line of a beer renaissance in Southeast Asia's largest economy, a market long dominated by a handful of big players turning out bland, mass-produced lagers.

Somewhat improbably, the three breweries have all launched during the pandemic, a once-in-a-lifetime economic shock that has added to challenges ranging from hard-to-obtain licenses, an inefficient Indonesian bureaucracy and Islamic-based parties pushing for a ban on alcohol consumption.

But even amid the global health crisis, suppliers say demand for craft beer is growing - and fast.

"There is a gold rush for craft beer in Indonesia right now," said Aaron Grieser, the founder of Beervana, a pioneering Southeast Asian craft beer distributor that has a presence in 10 cities across the region. "We're all saying it in the industry - the 2022-23 fiscal year is going to be the year of the craft beer boom."

Though alcohol consumption in Indonesia - a country with more than 270 million people - is the lowest per capita in Southeast Asia, there is huge potential for companies willing to brave its mazelike regulatory system and conservative bureaucracy, breweries say.

Beer in Indonesia was worth over $1 billion in 2020, according to Euromonitor International, a dip on pre-pandemic levels as sales were hit by virus restrictions and the loss of tourist business in important areas such as Bali. But the industry showed signs of bouncing back in the second half of last year.

"It's been tough and we don't really know when it is going to end," Wiranatha said. "But we've built Kura Kura during the pandemic and we're at a point now where we are able to fund our own growth, we're stable and going steady."

Wiranatha grew up in Bali but got interested in craft beer while studying in Australia. After finishing university in late 2018, he returned home to co-found Kura Kura with his father, Kadek, a successful entrepreneur whose Bali businesses include beach club Ku De Ta, Plaga Wine and hotels.

Since launching, the company has grown to employ 25 people and expanded distribution across Java, Indonesia's most populous island. Wiranatha plans to double production from 2021 to about 400,000 litres this year, while adding a hazy IPA to his pale ale and lager already on the market.

Islands of Imagination has had a similarly positive reception for its beers, which went on sale last September.

Started by Indonesian Laura Prinsloo and her South African husband Pieter Prinsloo, the microbrewery has six styles, including a lager using rice sourced from Bali's UNESCO-protected Jatiluwih rice fields, and a wheat beer incorporating salak - or snake fruit - which is native to Indonesia.

The couple sees big potential among Indonesian foodies for their "beers for Asian tongues."

"It is a completely new market, an untapped market," said Pieter, who oversees production at the company. "Two years ago there was virtually no craft beer in Indonesia. Now, suddenly there is a whole bunch of us popping up."

Indonesia's two main beer markets, Jakarta and Bali, are home to a thriving bar and dining scene, and the pandemic has fueled in-home consumption.

Ade Putri Paramadita, a 42-year-old food writer from Jakarta, couldn't be happier about the increasing variety of beers available. A few years ago, choices were largely limited to pilsners and stouts produced by big Indonesian brands like Bintang or Anchor, plus a few imports. Today, there is an "amazing" number of brews available and a growing number of bars and restaurants stocking them, she said.

"I'm so damn excited. Not only that we finally have more options, but I think it's cool to have more local microbreweries and hopefully more experimental beer options in the market," she said.

While there is a rush of small breweries setting up shop, Indonesia's barriers to entry are steep and a potential hurdle for growth in the sector.

Government regulations are the biggest challenge, followed by logistical ones such as inadequate cold chain infrastructure and sourcing ingredients from overseas, according to beer companies.

Indonesia has a finite number of alcohol licenses and is not producing more, creating a freewheeling market where a single permit can fetch millions of dollars. For companies that manage to secure one, building a brewery then requires approval at district, provincial and central government levels. Even getting the green light for a new product can take months at a time.

"It is very highly regulated," said Laura Prinsloo. "Just getting the license itself needs to be approved by so many layers on the government side."

Predominantly-Hindu Bali has emerged as a brewing hot spot because the government is seen as more accommodating to alcohol businesses. Islamic parties in Indonesia, the world's largest Muslim-majority nation, have long called for a ban on alcohol consumption and in 2015 successfully ended sales at convenience stores outside Bali.

Still, Indonesia's reputation as an underserved beer market dominated by a few corporations makes it "ripe for opportunity," Grieser said.

"What you've seen in every other country, including Thailand, Vietnam, Singapore and others in the region, is that once people get a taste for the new styles it's pretty easy to build a following," he said.

"If you look at other places, craft beer at maturity will be about 20% to 25% of the beer market value by revenue. I don't see why that would be different in Indonesia."

17 February, 2022